APHSCT TOWNSEND'S NOVEMBER 12 MEETING WITH MOSSAD CHIEF FOCUSES ON LEBANON, SYRIA AND IRAN

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S E C R E T SECTION 01 OF 04 TEL AVIV 004604

SIPDIS

THE WHITE HOUSE FOR APHSCT FRANCES FRAGOS TOWNSEND

TREASURY FOR UNDER SECRETARY STUART LEVEY

NSC FOR MALVESTI

STATE FOR NEA, NEA/IPA (MAHER),S/CT (AMBASSADOR CRUMPTON)

JOINT STAFF FOR J-5

HQ USEUCOM FOR ECJ-5 (KLOTHE)

PENTAGON FOR OSD ISRAEL DESK (ANDERSON)

E.O. 12958: DNG: CO 11/24/2026

TAGS: PTER, ECON, OVIP, AMGT, ASEC, SY, LE, IR, IS

SUBJECT: APHSCT TOWNSEND'S NOVEMBER 12 MEETING WITH MOSSAD

CHIEF FOCUSES ON LEBANON, SYRIA AND IRAN

Classified By: Classified by Charge Gene Cretz. Reasons: 1.4 (b) (d).

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SUMMARY

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1. (S) During a November 12 meeting, Mossad Chief Meir

Dagan told Assistant to the President for Homeland Security

and Counterterrorism (APHSCT) Frances Fragos Townsend that

USG efforts to designate Iranian banking facilities have

proven effective and are forcing the Iranians to move their

funds to banks in the Gulf States and the Far East. Dagan

urged the U.S. to continue activity in this direction,

noting that Swiss and Japanese banks are forgoing business

with Iran. Dagan warned that Iran and the Hizballah are

trying to bring the Siniora government down in Lebanon, and

that Hizballah's next step is to rally Shiites in the

streets to put more pressure on the GOL. Dagan said he

anticipates that this current effort will ultimately lead

to violence and the murder of some of Siniora's political

allies. On Syria, Dagan said that Asad is comfortable with

the current situation and has no intent of breaking from

his strategic alliance with Iran, or stopping his support

of Hizballah and Hamas. Dagan expressed frustration with

European attempts to engage Asad with the hope of bringing

him around, predicting that these attempts will fail, and

only encourage Asad to engage in more bad behavior. Dagan

said that the best way to change Asad's behavior is to

threaten force. He encouraged the U.S. to ratchet up

pressure on Syria by designating its Commercial Bank, and

asking the Saudis to put pressure on banks in Europe and

Dubai. Dagan expressed frustration with European

reluctance to designate Hizballah as a terrorist group.

END SUMMARY.

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DAGAN: KEEP UP THE FINANCIAL PRESSURE ON IRAN

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>2. (S) Dagan said that Treasury Department designation of

Iranian banking facilities has succeeded in its aims and

has proven very effective. The Iranians are now

preoccupied with this problem and trying to move funds to

banks in the Gulf States and Far East, specifically India,

China ((MLM: Dagan specifically noted Hong Kong)),Taiwan,

and Singapore. He added that the Iranians

are also encountering difficulties with European banks.

Dagan urged the U.S. to continue to move in this

direction. He noted that the Mossad has sent some of its

own people to Europe to keep up the bank pressure on Iran.

He said that Iran's economic situation is weak, and that

this is causing bankers and the Iranian middle class to

increase their criticism of Ahmadinejad and his regime. He

said that they are increasingly concerned that

Ahmadinejad's policies are going to lead Iran into

"financial disaster." Dagan added that Credit Suisse, UBS

and a number of Japanese banks have asked Iran not to do

business with them anymore.

3. (S) Dagan said that Israel is still having some problems

with banks in the UK, and noted that the Iranians are

trying to buy a Turkish bank there. The Iranians are

trying to move their foreign currency reserves from Europe

to the Far East. At the same time, they are also thinking

about how to do more work with the Euro, even while they

recognize that they need U.S. dollars. Dagan said that the

Iranians are finding it difficult now to transfer funds

from Sadarat Bank to Hizballah through Lebanon. They are

now transferring the money in cash using couriers that

carry it by suitcase from Iran to Hizballah recipients.

Dagan stressed that Treasury Under Secretary Stuart Levey's

direct discussions with bankers appears to yield better

results than when governments deal with one another.

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"WE ARE ON THE EDGE OF A CRISIS IN LEBANON"

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4. (S) Dagan warned that Israel and the U.S. are on "the

edge of a crisis" in Lebanon as Syria, Iran and Hizballah

are trying to bring down the Siniora government "in stages"

through various tactical moves. The Hizballah ministers in

PM Siniora's government had resigned, and Hizballah is

planning to bring Lebanon's Shiites into the streets to

increase pressure on the GOL. Dagan said that Hizballah's

plan has been coordinated well with the Syrians, and that

Iran is aware of this plan and has had a part in

formulating the strategy.

5. (S) Dagan said that this effort has two aims:

A) To form a unity government and bring others into it in

order to overwhelm Siniora. Hizballah needs to do this

before Lebanese President Lahoud finishes his term. Dagan

said that Michel Aoun is trying to get elected president,

and is getting support from the Saudis to this end. Dagan

claimed that Aoun is trying to mediate between Siniora,

Samir Geagea and the West.

B) To increase Shia representation in the parliament by

changing the electoral law.

Dagan warned that Israel and the U.S. are now witnessing

the beginning of a crisis in Lebanon. He said he would not

be surprised if the end involves violence and the murder of

people just below Siniora ("second echelon types") before

the UN finishes its investigation into the assassination of

PM Hariri. Dagan said that he does not believe that

Hizballah would try to kill Walid Jumblat or Siniora, but

might try to kill Marwan Hamedi and others like him. "This

is the typical Lebanese way to solve problems," Dagan

added.

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SYRIA: ASAD CONTINUES TO BACK TERRORIST GROUPS

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6. (S) Dagan said that based on the intelligence he has

collected, he would estimate that Syrian President Asad is

satisfied with the current situation in the region, and has

no intention of stopping his support for Hizballah, Hamas

and PIJ. Asad views his alliance with Hizballah and Iran

as strategic, a view that justifies allowing Palestinian

Islamic Jihad (PIJ) and Hamas to continue to operate from

Damascus, and to send radical Islamic fighters across the

border into Iraq. Dagan claimed that Asad is "happy to see

U.S. soldiers killed in Iraq."

7. (S) Dagan noted that a British delegation led by former

UK FM Douglas Hurd and former MI6 Chief John Scarlett had

visited Syria to talk with Asad. According to Dagan, Asad

made no concessions to the delegation, and instead asserted

that Lebanon is Syria's number one priority. Dagan noted

that Asad occasionally calls for peace negotiations with

Israel, but then sets unrealistic conditions for starting

them. He explained that this pattern of behavior is done

to ease international pressure on Syria, and expressed his

view that he does not believe that Syria is willing to make

peace with Israel. Instead, Dagan said, the Syrians are

now looking at different ways to engage Israel by force.

Dagan acknowledged that Israel is not aware of any Syrian

plans to attack Israel in any way at this time, but

cautioned that, in comparison with the past, more of Asad's

advisors are talking about fighting Israel, and using

terrorists in the fight. Dagan claimed that Asad has

appointed "ex-reservists" from the Golan Heights -- who are

in their eighties -- as "resistance fighters."

8. (S) Dagan said that Asad's new policy and guidelines

towards Israel drive his relations with the Palestinians as

well. He is now encouraging Hamas to "behave" vis-a-vis

Palestinian President Mahmud Abbas in his drive to form a

national unity government. At the same time, Asad is

encouraging Khaled Meshal to adopt more radical positions.

9. (S) Dagan claimed that Syrian-Iranian intelligence

cooperation is enhancing, and pointed to "joint command

posts" staffed by Syrian and Iranian intelligence officers,

including personnel from the Iranian Revolutionary Guard

Corps (IRGC) and Hizballah.

10. (S) Dagan said that Asad is also allowing weapons to be

transferred from Iran to Turkey and then to Syria, with

their ultimate destination being Hizballah. He

acknowledged that Mossad suspects this only, and has no

"smoking gun" or hard evidence to prove it.

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DAGAN: TALKING WITH SYRIA REWARDS BAD BEHAVIOR

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11. (S) Dagan said the GOI shares the USG's frustration

with the hesitation of European governments to designate

Hizballah as a terrorist organization. He noted recent

visits by European foreign ministers to Damascus, and said

they reflect a view -- held by Spanish Foreign Minister

Moratinos, as well as the Germans -- that dialogue with

Asad is the key to luring him away from Iran's influence.

He added that the Egyptians are trying to convince other

Arabs to reach out to Asad. Dagan said that he is

convinced they are doomed to failure. He praised the Gulf

States for understanding the threat posed by the

"Iran-Hizballah-Syria" axis: "They see it as a threat, and

as a sign of an oncoming Shia-Sunni conflict. It is not

really a religious war, but that is how they see it, and

they are right to view it as a threat." Dagan credited the

French for being less sympathetic to Syria than other

Europeans, but added that they do not want to cooperate on

Hizballah as their troops are deployed in Lebanon.

12. (S) Dagan cautioned that engaging with Asad in

negotiations on the Golan Heights or a Free Trade Agreement

with Europe would only reward aggression. He asserted that

all previous attempts to open dialogue with the Syrians

were misread and viewed by the ruling regime as a reward

for behaving badly. Israel, he stressed, has engaged with

the Syrians for the past fifty years: "The only thing the

Syrians understand is force and pressure." As an example,

he pointed to Syria's withdrawal from Lebanon, asserting

that it happened only because Asad feared that the

international community would attack Syria in the wake of

the Hariri assassination. "Retreat was not due to

dialogue, but due to fear of brute force," Dagan said.

Dagan added that Syria dropped its support for the PKK when

Turkey threatened to go to war over it.

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DAGAN URGES STRIKING AT SYRIANS' POCKETBOOKS

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13. (S) Dagan said that even though the Syrian economy is

collapsing, he does not envision a real change in Syria any

time soon. Townsend commented that we must continue to work

with financial institutions to create problems for the Syrian

banking system similar to those now facing Iran. In response

to a question, Dagan said it would

help if the U.S. would increase pressure on the Commercial

Bank of Syria, and that he would recommend this himself to

Treasury Under Secretary Stuart Levey when they next meet.

Clamping down on the Commercial Bank of Syria would be

effective especially as key Syrian government ministers are

trying to invest outside of Syria. Dagan added that the

timing of this effort is very important, and said he

expects that the results of the UN's investigation into the

Hariri assassination will implicate Syria.

14. (S) Dagan suggested the U.S. could also bring more

pressure to bear on Syria by encouraging the Saudis to

pressure Europe. Noting that the Saudis are considering

buying 70 Tornado fighter-bombers from the UK, he wondered

aloud if the USG could encourage the Saudis to buy their

arms from the U.S. instead of from the Europeans. Townsend

said that the USG will encourage the Saudis to put pressure

on banks in Dubai, as they are clearinghouses for

proliferation activity. Dagan agreed that pressuring Dubai

would be helpful, especially as the Iranians are trying to

buy up property there. He cautioned, however, that not all

Saudis would be inclined to help -- securing King

Abdullah's support would be vital: "If you can get the

King to support you, others will follow. If he threatens

to take his money somewhere else, that would be a serious

threat." Dagan asked Townsend to have the USG put more

banking pressure on the Syrians: "By hitting Syrian banks,

you also hit Hizballah and Iran. It is a very effective

tool that has proven itself."

15. (S) Dagan concluded the meeting by noting that

cooperation between his staff and POL/RES is excellent.

16. (U) APHSCT Frances Fragos Townsend cleared on this

cable.

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CRETZ

APHSCT TOWNSEND'S NOVEMBER 12 MEETING WITH MOSSAD CHIEF FOCUSES ON LEBANON, SYRIA AND IRAN

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